Revenue Leakages: Nigeria, Others To Stop Tax Incentives, Waivers

Following the massive revenue leakages suffered by Nigeria and other African countries, the executive secretary of the African Tax Administration Forum (ATAF), Mr. Logan Wort, and the executive chairman, Federal Inland Revenue Services (FIRS) Muhammad Nami have proposed a stop to tax waivers and incentives.

They both disclosed this yesterday at the 7th ATAF General Assembly where tax professionals and stakeholders converged to discuss ‘Rethinking Revenue Strategies: The Human Face of Taxation.

Africa loses and estimated 3.5 per cent of its gross domestic product to tax incentives annually.

Speaking on the sideline, Wort said: “On tax incentives,  it is true that tax incentives are responsible for a lot of leakages and a major cause of illicit financial flows out of  Africa. It puts it at 3.5 per cent of GDP that Africa loses in tax incentives.

There are things on the horizon, firstly, the discussions on the inclusive framework dealing with a digital economy has proposed a global minimum tax of 15 per cent  and should that come into play,  all companies will have to pay a minimum of 15 per cent.  So, when an African country gives a tax incentive of zero to a company, that company will have to pay 15 per cent of tax to someone in the world.

incentive, that 15 per cent will simply go to another country. So, we are now being discouraged from doing these tax incentives.

“Secondly, in other words, we are developing a proposal for an African minimum domestic tax. We are proposing to the AU that we introduce on the continent a minimum domestic tax so that nobody pays zero tax. Those are the two ways in which we think the issue of tax incentives will be dealt with.”

On his part, Nami noted the country could benefit more from stopping tax waivers citing that as a better option to continuous borrowing.

He said: “On incentives that we give to businesses, It is not as if incentives are bad but tax waivers are what is exactly the issue. The global best practice today is not for us in Africa to continue to give tax waivers to companies because when you give this waiver to them here, they go back somewhere else to pay the taxes and we follow those same people to go and collect loans for purposes of funding our budgetary requirements.”

“So, the best practice today is for us to mobilise these resources from these taxpayers and apply it to build infrastructure where necessary,  to grant loans to SMEs where necessary so that we’re able to grow the economy instead of taking loans.”